Press Notice No. 24 of Session 2005-06, dated 14 February 2006
TWENTY-FOURTH REPORT: THE BBC'S WHITE CITY 2 DEVELOPMENT (HC 652)
Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today:
"The BBC's White City 2 development was completed on time and is supporting the BBC's plans to rationalise other parts of its estate.
"But the BBC's management of the project can be criticised on a number of counts. The BBC entered a deal where the potential return to the private sector was excessive, where the Corporation could not be sure of sharing in any refinancing gains, and where it ended up buying out its partner less than five years into the 30 year deal. The cost of the development turned out to be over £60 million more than the amount originally approved by the Governors and, as the project progressed, the BBC made significant variations to the scheme. And the buildings are not currently being used to their full potential.
"The Committee's Report today provides Parliament and licence fee payers with insights about the BBC's use of public money which would not otherwise have been available. The BBC has confirmed that its editorial independence has not been put at risk by the Comptroller and Auditor General's work. So there is no possible reason why the BBC should not be as accountable to Parliament as any other organisation spending public money.
"The current time-limited programme of six reviews of the BBC by the Comptroller and Auditor General ends this year. He should then be granted full access rights to the BBC which give him a free hand in choosing subjects for examination."
Mr Leigh was speaking as the Committee published its 24th Report of this Session.
The BBC's White City 2 property development in West London comprises three new buildings which were built next to an existing BBC building known as White City 1. The construction of the new buildings forms part of the BBC's plans to rationalise and modernise its estate.
White City 2 was financed and developed by Land Securities Trillium under a 30 year partnership deal with the BBC, which also covered property services at 48 other BBC locations. The cost of constructing White City 2 in Land Securities Trillium's bid was £210 million, £31 million more than the cost in the other short listed bid. However, other benefits including savings across the wider BBC estate and price certainty led the BBC to select Land Securities Trillium. The BBC subsequently had to pay a further £60.9 million for additional requirements, such as furniture and the technical fit-out of the buildings.
Two of the new buildings in the White City 2 development were completed on time in October 2003 and the last was ready in January 2004, three months ahead of schedule. The BBC has used the buildings to accommodate staff vacating other sites in London. A year after White City 2 was completed, 22% of the office space was still unoccupied, although the proportion of unoccupied space has since fallen to 6.5%.
In March 2005 the BBC purchased Land Securities Trillium's interest in White City 2 to allow refinancing of the project. The original contract had included a provision to share in refinancing benefits, but the way the project was financed meant that the BBC was unlikely to secure a share of the benefits. The financing mechanism also meant the BBC was unable to calculate the return to shareholders, although the contract included a provision to cap the return at 30%, which was much higher than typical rates of return for deals of this type.
The Comptroller and Auditor General is carrying out six reviews of the BBC under an agreement between the BBC and the Secretary of State for Culture, Media and Sport. White City 2 is the third of those reviews and on the basis of the Comptroller and Auditor General's Report and a memorandum by the BBC on developments since the Report, the Committee examined the BBC on the cost of the White City 2 development and how it is being used. The Committee also considered the arrangements for the Comptroller and Auditor General's work on the BBC.
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